Sign in

How Medicare Was Made

Lady Bird Johnson, former President Harry Truman, and Bess Truman look on as President Lyndon Johnson signs Medicare into law.Credit PHOTOGRAPH BY FRANCIS MILLER/THE LIFE PICTURE COLLECTION/GETTY

Fifty years ago, Congress created Medicare and Medicaid and remade American health care. The number of elderly citizens lacking access to hospitals and doctors plummeted. Hospitals, physicians, and state and local governments came to depend on this federal funding. We have a tendency to forget the history of laws that extended the obligations and commitments of the federal government. But the passage of Medicare and Medicaid, which shattered the barriers that had separated the federal government and the health-care system, was no less contentious than the recent debates about the Affordable Care Act.

When Medicare was first proposed, in the late nineteen-fifties, national health insurance had been a losing cause for decades. In the thirties, Franklin Delano Roosevelt had chosen not to add health care to his Social Security proposal because he believed that it would be too controversial, and would damage the prospects of other programs. Whereas most Western democracies had adopted some form of national health-care program, the United States relied on a private system that revolved, as the sociologist Paul Starr has recounted, around a sacred understanding of the doctor-patient relationship. When liberals talked about giving the government a bigger role in health care, stakeholders in the existing system always fought back, protecting their authority and autonomy by warning that Washington would sever the ties between doctors and their patients. It was one thing to distribute old-age pensions but quite another to allow the government to intrude into intimate medical affairs. When one senator suggested in 1937 that President Franklin Delano Roosevelt was prepared to expand the government’s role in medicine if doctors did not do more to help the needy, Time magazine asked in its June cover story, “Nationalized Doctors?”

When President Harry Truman proposed national health insurance for every American in 1945, and again in 1949, as part of his effort to move forward with domestic policies that had been left out of the New Deal, he and allied liberals came to see why F.D.R. had avoided the issue of health care back in the nineteen-thirties. The American Medical Association conducted the most expensive lobbying effort to that date in opposition to Truman’s health-care plan, which it branded as “un-American” and “socialized medicine.” Charging that the Truman Administration consisted of “followers of the Moscow party line,” the A.M.A. worked closely with the conservative coalition in Congress to kill the measure in committee. By 1950, the proposal was dead.

Meanwhile, during the forties and fifties, the government solidified the private health-care system through corporate tax breaks that subsidized companies offering their workers insurance. More workers were brought into the private system through this indirect and hidden form of government assistance, creating even greater resistance to the idea of the federal government directly providing insurance.

Still, many Democrats remained convinced that the health-care system left too many Americans without access to affordable care. In 1957, Congressman Aime Forand, an ardent New Deal liberal who had quit school after seventh grade to take care of his ailing father, came up with the idea of a smaller and more targeted program as a first step toward national health insurance. With Congressman Cecil King, a California Democrat, Forand proposed covering some of the medical costs of the growing number of Americans over the age of sixty-five. The problem of elderly Americans who lacked health care was acute, according to the Department of Health, Education, and Welfare. Older Americans required more than twice as much hospital care as people under the age of sixty-five. Even with Social Security benefits, most could not afford the cost of hospitalization, which was rising rapidly during these years as a result of medical advances. Forand and King made the tactical decision to propose that the program fall under the Social Security Administration. Liberals would be able to argue that they were simply expanding the popular program and paying for the new benefits through the Social Security payroll tax.

In the House and Senate, the proposal, which the media called Medicare, received strong support from a new cohort of Democrats including Richard Bolling, of Missouri, and Hubert Humphrey, of Minnesota, whose numbers had been steadily growing since the 1946 election and exploded in the 1958 midterms. They were a new generation of Northern liberals who, while slightly younger than Forand and King, had been deeply influenced by the New Deal and were committed to extending its benefits in areas like health care, civil rights, and education. In their minds, the economy was booming, so the U.S. could afford to have the federal government alleviate all kinds of social problems that, until then, had been ignored. They were aligned with Walter Reuther, the president of the United Automobile Workers, who said to the program’s critics that it was time to “quit fighting ideological windmills and deal with basic human needs.”

Organized labor, a powerful player in American politics at this time, when thirty per cent of the workforce was unionized, threw its support behind Medicare. Labor leaders cheered when Massachusetts Senator John Kennedy announced his support for Medicare during his 1960 Presidential campaign against Richard Nixon. Kennedy was no radical, but he believed that health care was one area where the government needed to have an expanded role. Kennedy saw the revised health-care bill as attractive in principle, as well as fiscally responsible, because workers would pay for the benefits that they would eventually receive. On August 14, 1960, Kennedy visited Hyde Park to celebrate, with Eleanor Roosevelt, the twenty-fifth anniversary of Social Security, and he used the occasion to promote Medicare. The program was desperately needed in “every city and town, every hospital and clinic, every neighborhood and rest home in America—wherever our older citizens live out their lives in want and despair under the shadow of illness,” the candidate said.

Despite his reputation for being dispassionate about domestic policy, Kennedy, as President, authorized an all-out public-relations effort in support of Medicare. While there were many areas of policy, like civil rights, where Kennedy avoided action for fear that congressional conservatives would kill his ideas, the President believed that the bill stood a decent chance of passing, because so many voters loved their Social Security. On May 20, 1962, the President delivered a spirited address at a rally in Madison Square Garden, with more than seventeen thousand people in attendance and many more watching on television. “The fact of the matter is that what we are now talking about doing, most of the countries of Europe did years ago,” Kennedy said. “The British did it thirty years ago. We are behind every country, pretty nearly, in Europe, in this matter of medical care for our citizens.”

The A.M.A. launched an aggressive campaign in opposition to the President. Edward Annis, the president of the A.M.A., delivered a televised response to Kennedy’s address: Medicare would “put the government smack into your hospital.” A new A.M.A. political-action committee offered campaign support to candidates who opposed the bill. The A.M.A. women’s auxiliary launched Operation Coffee Cup, in which doctors’ wives hosted living-room discussions about the dangers of socialized medicine. Ronald Reagan produced a record to be played at these events, “Ronald Reagan Speaks Out Against Socialized Medicine,” in which he warned that “one of the traditional methods of imposing statism or socialism on a people has been by way of medicine.” The A.M.A. also had strong allies, such as the insurance lobby, which preferred to work behind the scenes to combat the bill.

In the House of Representatives, A.M.A. officials were counting on Wilbur Mills, an Arkansas Democrat and the chairman of the Ways and Means Committee. At five foot eight and a hundred and eighty pounds, with slicked-back hair and thin silver-rimmed glasses, Mills didn’t look like a congressional giant, but he was a key player in the insular world of tax and security experts. A graduate of Hendrix College, in Arkansas, he had attended Harvard Law School and was rumored to spend evenings reading the tax code. He had lived with his wife in the same modest apartment, near the National Zoo, for almost twenty-five years, and was renowned for his grasp of abstruse fiscal issues.

What drove Mills most was his belief in fiscal conservatism. He understood that the federal government was a permanent part of American life, but he was determined to contain the growth of the federal budget and to limit the tax burden that fell on working Americans. What most troubled Mills about the Medicare proposal was that its costs would grow rapidly, especially when voters learned that physicians’ bills were not covered by the program and pressured legislators to add those benefits as well. With Medicare, Congress could be forced to raise Social Security taxes beyond reasonable levels, resulting in a backlash against the entire program.

Each time liberals had pushed for Medicare over the six years since Forand and King first proposed it, Mills had refused to let it up for a vote in his committee. In 1960, working with Oklahoma Senator Robert Kerr, Mills had attempted to stifle the drive toward Medicare by passing a limited program that provided means-tested health insurance to elderly citizens who were poor. As with public welfare, the program would be administered by state and local governments that chose to participate. Although Congress passed Medical Assistance for the Aged, known as the Kerr-Mills Act, only twenty-eight states had adopted it, and the guidelines for participation were so stringent that only one per cent of the elderly received benefits. Still, when Kennedy sent the proposal to Congress and rallied support on television, Mills would not bring Medicare up for a vote.

When Lyndon Johnson became President, in November, 1963, he made it clear that he was determined to pass Medicare. His overriding goal was to persuade Congress to pass a series of major bills that would constitute a second New Deal. Along with civil rights, Medicare was at the top of his list. Johnson urged Wilbur Cohen, a leading figure in the Social Security Administration, to work with Mills to come up with a Medicare proposal that was acceptable to the Ways and Means chairman. “If labor will buy it, that he can call a Mills bill,” Johnson told Cohen.

The negotiations didn’t get far. Even as Johnson called on Congress to fulfill the unfinished agenda of the slain President, Mills refused to hold a vote. He said that the cost problems had not been solved, and that there were not enough votes in the House to pass a bill if he sent it out of committee. In October, Medicare proponents in the Senate made a bold move by attaching Medicare as an amendment to legislation increasing Social Security benefits. Mills killed the proposal in conference committee. “I don’t know whether we can pass it next year or not,” Johnson told Senator Hubert Humphrey.

On Election Day, everything changed. Johnson defeated the right-wing Republican Senator Barry Goldwater in a landslide victory. Democrats obtained two hundred and ninety-five seats in the House and sixty-eight in the Senate. For the first time in decades, liberal Democrats, rather than more conservative Southerners, held the balance of power within their own party.

When the eighty-ninth Congress convened, in January, 1965, the emboldened liberals drove through a series of reforms and reorganization to further strengthen their hand. One of the important changes was to alter the party ratios on each committee to reflect the new majority. The Democrats added two pro-Medicare legislators to Ways and Means, while the G.O.P. assigned one. Democrats also instated the “twenty-one-day rule,” a procedure that offered a mechanism for moving a bill out of the House Rules Committee if the conservative chairman, the notorious Howard Smith, was refusing to allow it out for a vote. With these changes, House Majority Leader Carl Albert told Johnson, it wouldn’t matter if Mills was “for Medicare or not.”

On January 5th, Mills told the White House that Medicare would be the first order of business. The chairman knew that even if he continued to oppose the bill, pro-Medicare Democrats would be able to pass it without him, and without consulting him. Mills understood that his best option was to craft a Medicare proposal that would contain costs as much as possible and would allow him to take credit for a major legislative victory.

Republicans, too, wanted to be part of the debate, and offered alternative proposals. Congressman Thomas Curtis, of Missouri, and A. Sydney Herlong, a Florida Democrat, proposed an expansion of Kerr-Mills that had the backing of the A.M.A. The ranking Republican on Ways and Means, John Byrnes, of Wisconsin, offered a more ambitious plan. Byrnes, who shared Mills’s fiscal conservatism but also believed in the importance of social policy, proposed a voluntary program that would cover the costs of physicians for older Americans. Those who elected to participate would contribute a monthly premium toward their care, while the federal government would finance the rest through general tax revenue.

Medicare proponents had to make sure that there were not so many proposals that they siphoned off majority support for their bill. In closed-door hearings, Mills was now defending the fact that the Administration’s plan depended on Social Security taxes. “Haven’t we done a better job … of financing the cost of the Social Security program out of a separate fund, paid for by a payroll tax, than we have some other expenditures of government?” he asked.

As the discussions proceeded, the chairman had an even bigger idea, thinking of a way to put together a bill that would be almost impossible to defeat and which would satisfy some of his fiscal fears. On the afternoon of March 2nd, he leaned back in his chair and told Wilbur Cohen, “Maybe it would be a good idea if we put all three of these bills together.” Cohen, who had been negotiating with Mills for years, immediately had his staff draft a new bill.

Based on Mills’ idea, which Cohen called a “three-layer cake,” the Administration revised its bill to include hospital insurance paid for by Social Security taxes, a voluntary program covering physicians’ costs paid for by a contribution from beneficiaries and general revenue from the federal government, and an expanded version of Kerr-Mills, later called Medicaid.

Mills boasted that this plan satisfied everyone. Republicans couldn’t complain, because their ideas were part of the bill. Premiums and general tax money would pay for the part of the program covering doctors’ bills, so the future burden on Social Security taxes would be more predictable. Because private physicians fell under the voluntary part of the program, the A.M.A. could not as easily claim that this was “socialized medicine.”

On March 23rd, the Ways and Means Committee approved the bill by a vote of seventeen to eight. Republicans still voted for the John Byrnes bill, but did so knowing that the “three-layer cake” would pass. Cohen called Johnson to tell him about the outcome. “I think it’s a great bill, Mr. President,” Cohen said. “You got not only everything that you wanted but we got a lot more than—on this thing. It’s a real comprehensive bill.”

The American Medical Association knew that it had been beaten. Once it lost Wilbur Mills, it lost Congress. The House passed the final bill by a vote of three hundred and thirteen to a hundred and fifteen, on April 8th. The only remaining threat to Mills’s proposal came from liberals who tried to add amendments in the Senate, which would increase the cost of the legislation. But, in the conference committee, Mills systematically knocked down each amendment. He made only one major compromise, that hospitals and doctors would determine the “reasonable charges” for costs rather than the government doing so through regulated prices. He incorrectly assumed that this would not result in huge costs.

On July 30th, Johnson signed the Medicare bill, in Independence, Missouri, with former President Harry Truman standing beside him. For the first time, the federal government would play a direct role in the health-care system. Most liberals wanted much more, but they understood that passing Medicare and Medicaid was itself a historic step.

With the passage of Medicare and Medicaid, decades of obstruction came to an end. But turning a legislator like Mills was not easy. Persuasion and negotiation could only go so far. It took a big election, with voters changing the balance of power on Capitol Hill, to get him moving in the right direction.

Julian E. Zelizer is the Malcolm Stevenson Forbes Class of 1941 Professor of History and Public Affairs at Princeton, and a fellow at New America. He is the author of “The Fierce Urgency of Now: Lyndon Johnson, Congress, and the Battle for the Great Society.”